Day 3: Encounter rages on at Nariman house

Indian commandos were dropped by helicopter onto the roof of Jewish centre in Mumbai, where suspected Islamist militants are holding at least 10 Israelis, live television pictures showed.Spl: Mumbai Bleeds|

Indian commandos were dropped by helicopter onto the roof of a Jewish centre in Mumbai, where suspected Islamist militants are holding at least 10 Israelis, live television pictures showed on Friday.

The Jewish Centre was one of three pockets in the country's financial capital where Indian forces were battling to flush out die-hard militants, more than 24 hours after a band of heavily armed fighters killed at least 127 people in coordinated attacks.

A Reuters witness said security forces fired into the Jewish centre, apparently to provide cover, as commandos rappeled down a rope from the helicopter.

Police said militants were also still holed up at the Taj Mahal hotel and the nearby Oberoi-Trident hotel along with an unknown number of hostages. A Reuters witness said commandos also stormed into the Oberoi-Trident on Friday morning.

Prime Minister Manmohan Singh pinned blame for the attacks on militant groups based in India's neighbours, usually an allusion to Pakistan, raising prospects of renewed tension between the nuclear-armed rivals.

He warned of "a cost" if these nations did not take action to stop their territory being used to launch such attacks.

An estimated 25 men armed with assault rifles and grenades -- at least some of whom arrived by sea -- fanned out across Mumbai on Wednesday night to attack sites popular with tourists and businessmen, including the city's top two luxury hotels.

Police said at least seven of the attackers were killed and nine suspects had been taken into custody. They said 12 policemen were killed, including Hemant Karkare, chief of the police anti-terrorist squad in Mumbai.

At least six foreigners, including one Australian, a Briton, an Italian and a Japanese national, were killed. Scores of others were trapped in the fighting or were being held hostage.

More than 300 people were wounded.

Commandos battled the militants through Thursday, often room to room in the hotels, to rescue people. Flames billowed out of the buildings and loud explosions were heard during the fighting.

Mumbai, a city of 18 million, the nerve-centre of India's growing economic might and home to the "Bollywood" film industry, was virtually shut down on Thursday as the battles raged.

But in a reflection of the poverty that sits cheek-by-jowl with the upmarket shops and restaurants in the city, hundreds of people were stretched out asleep on pavements and handcarts near the scenes of fighting.

The sea-facing Marine Drive in front of the Oberoi-Trident is a favoured spot for early morning walks, and some regulars came out for their constitutional despite the tension.

"I hear they (the security forces) have relaxed the rules a little so I came for my morning walk but I did not see any of the regulars," said Raja Ram Patil, 54, a local businessman.

PAKISTAN-BASED GROUPThe Hindu newspaper said at least three of the attackers taken into custody were members of the Lashkar-e-Taiba group, based in Pakistan.

The group made its name fighting Indian rule in disputed Kashmir, and has been closely linked in the past to the Pakistani military's Inter Services Intelligence agency, the ISI.

Lashkar-e-Taiba has denied any role in the attacks.

"It is evident that the group which carried out these attacks, based outside the country, had come with single-minded determination to create havoc in the commercial capital of the country," Prime Minister Singh said on Thursday.

"We will take up strongly with our neighbours that the use of their territory for launching attacks on us will not be tolerated, and that there would be a cost if suitable measures are not taken by them," he said in a televised address. Pakistan, condemning the assault, promised full cooperation.

Hindu-dominated India, which has a sizeable Muslim minority, has been hit by militant attacks for decades. But this strike seemed aimed at crippling its ability to draw foreign investment.

British Prime Minister Gordon Brown said the attack would be met with a "vigorous response".

US President-elect Barack Obama condemned the incident. Obama, who favours a regional solution to the war in Afghanistan and is encouraging Pakistan and India to make peace over Kashmir, was monitoring the situation closely, an aide said.